Federal prosecutor Cliff Stricklin asked former Qwest president Afshin Mohebbi this afternoon why he didn’t sell millions of stock options during a period when he and other executives were telling their boss, Joe Nacchio, that revenue targets he was setting were too hard to meet.

But U.S. District Judge Edward Nottingham didn’t allow Mohebbi to answer. Nottingham is presiding over the trial of former Qwest CEO Nacchio,who is charged with 42 counts of insider trading. The trial is now in its third week.

Under questioning by assistant U.S. attorney Cliff Stricklin, Mohebbi said he had $8 million worth of vested options in January, and by May the stock was worth about $4 million.

Stricklin asked why he hadn’t sold the stock. But Nacchio’s defense lawyer, Herbert Stern, objected, which Nottingham sustained, keeping an answer that could have suggested Mohebbi was concerned about insider trading regulations, out of the record.

Stern has begun his cross examination of Mohebbi, who started working at Qwest during a period when the company was launching a planned merger of regional Bell telephone company US. West.

As part of planning for the merger, investment banking firm Donaldson, Lufkin & Jenrette performed an extensive review of both companies on which it based five-year revenue and earnings projections for the merged entity.

Stern hammered on that study as he cross-examined prosecution witnesses. Projections that the company gave to Wall Street after the merger were based in large part on that study.

But the study didn’t forsee that the market for telecommunications services would begin to dry up as a recession took hold of the country beginning in 2000.

The government contends that Nacchio knew the company was facing financial difficulty when he painted a rosy picture for investors of the company’s growth prospects. He is charged with insider trading in the sale of $100.8 million in stock during the first five months of 2001.

Mohebbi testified this morning that discussions grew tense over what sales projections should be given to Wall Street analysts and that documents filed with federal regulators included statements attributed to him that he never made.

Mohebbi said that a number of department heads gathered to describe what they were doing to make revenue targets, during which Betsy Bernard, then head of the company’s mass markets division, said she hadn’t been able to reach the revenues projected for her group.

Steve Jacobsen, former head of Qwest global markets, “became very upset at Ms. Bernard’s presentation and told her “I don’t understand why you just can’t close the gap,'” Mohebbi said, adding that Jacobsen had been able to close the projected gap in his department.

Mohebbi described Jacobsen as unusually agitated, and said he took a document and threw it at Bernard. Nacchio told Jacobsen to apologize, he added.

Mohebbi said that documents the company sent to the Secruities and Exchange Commission listing items that he supposedly told investors at a conference were wrong.

The documents said that at two seperate conferences Mohebbi told investors he was “comfortable” with the guidance Qwest was giving Wall Street.

Mohebbi said he never reviewed nor signed the documents submitted in the first quarter of 2001 to the regulatory agency.

“I wouldn’t make that statement, that I was comfortable with the guidance,” he said.

“Who filled out this form?” asked prosecutor Cliff Stricklin

“I believe it was filled out and sent by someone in the legal department,” Mohebbi answered.

Mohebbi also described an email he left on Nacchio’s chair that said it would be a “huge stretch” to make revenue targets that Nacchio was setting for his executives.

If the company wasn’t able to generate substantial amounts of recurring revenue by April and May 2001, the memo said, the amount of non-recurring revenues, which came from one-time deals, would be “too large to deal with,” he said.

By that time, the memo suggested, the company had not been very successful in snaring recurring revenues.

“Our track record in this area is not that good, as you know,” he wrote.

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